The business behind the show

Disney launches online movie site, without fanfare

November 14, 2010 | 5:00
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Walt Disney Co. quietly launched Disney Movies Online, which lets consumers buy or rent digital versions of Disney and Pixar films and watch them on the Internet. The site, which debuted without fanfare in May, was conceived as a bridge to step the family entertainment company’s mainstream consumers gently from the physical to the digital world.

How much without fanfare? Disney still isn’t promoting the site –- there are no links on the Disney.com site -- beyond inserting the Web address on a sleave inside DVDs and Blu-ray discs.

In a second, more-public milestone, Disney partnered with Wal-Mart Stores Inc. to offer a free “digital copy” of the movie “Toy Story 3” with the purchase of the video. Consumers use an enclosed code to unlock and watch the film through the retailer’s Vudu online movie service.

Taken together, these developments help lay the foundation for Disney’s vision of the digital future, in which consumers would buy, store and access digital copies of the studio’s films from one place. These efforts work in tandem with an initiative announced last year called KeyChest. The technology would allow consumers to pay once for a movie, then watch it on any device, such as Internet-connected computers and mobile phones.

“We believe if we harness the power of these separate initiatives … we’ll immediately seize the opportunity, extend a lot more benefits to Disney customers and sort of catapault this thing into the future very rapidly,” said Bob Chapek, distribution president for Walt Disney Studios.

Despite the convenience of renting and buying movies online -– and the promotional bonanza 38 million visitors to Disney.com delivers -– the company is keeping mum about Disney Movies Online because it is still in a test phase, officials said. At some point in the first half of 2011 a promotional campaign for the studio’s digital offering is expected to kick in, under the name Disney Studio All Access.

Spurring digital sales is of crucial importance to film studios as traditional DVD sales decline and consumers gravitate to cheaper rentals from Netflix and Redbox. Sales of next-generation Blu-ray discs are growing but don’t make up the shortfall. Meanwhile, Internet movie downloads and streams have yet to emerge as a significant source of new revenue.

Disney and other studios are attempting to tackle the problem by addressing some of the chief obstacles to consumer adoption –- difficulty playing back movies on devices other than the PC and storage limitations on a computer’s hard drive.

“When people buy a file in some form, if you give the ability to play that file on multiple devices or in multiple locations, then you’re creating more value for them,” Disney Chief Executive Robert A. Iger said during the company’s most recent earnings call. “I think lack of interoperability is an impediment or a barrier to growing digital media.”

A coalition of Hollywood and Silicon Valley –- including Sony Corp., Warner Bros., NBC Universal and News Corp., together with Microsoft Corp., Intel Corp. and Best Buy -- creates a system for consumers to buy, store and access movies across multiple devices.

Chapek and Iger insist the technologies are compatible.

“It’s not our goal to create a format war,” Iger said. “It’s our goal to create product and to implement technology that ultimately creates more value to the consumer.”